Property tax credit ‘gap year’ fix offered

The Revenue Committee heard testimony Feb. 26 on a proposal intended to address the effects of recent legislation that modified a property tax relief program.

The Nebraska Property Tax Incentive Act, passed by the Legislature in 2020, allowed taxpayers to apply for a refundable state income tax credit based on property taxes paid to their school district.

Under LB34, passed during last year’s special session dedicated to property tax reform, lawmakers modified the program so that taxpayers now will receive a credit on their property tax statement against taxes owed to school districts. They no longer need to apply for the credit.

Last year’s measure made the refundable credit available only for tax years beginning before Jan. 1, 2024.

Gering Sen. Brian Hardin, sponsor of LB81, said that, although he supported last year’s measure, he did not realize that it “unintentionally shortchanged” Nebraska taxpayers by creating a “gap year” in relief for those who paid their 2023 property taxes in 2024.

“Ignorance is not an excuse, nor should it be a reason to avoid taking corrective action,” he said. “When we recognize a mistake, the only right thing to do is fix it.”

LB81 would close the gap by allowing affected taxpayers to claim the refundable credit in taxable years beginning in 2024, Hardin said.

The state Department of Revenue estimates that the bill would reduce state general fund revenue by $102 million in fiscal year 2024-25, $503 million in FY2025-26 and $32 million in FY2026-27.

James Greisch testified in support of LB81 on behalf of the Nebraska Society of CPAs, Greater Omaha Chamber of Commerce and Lincoln Chamber of Commerce. Although it was not the Legislature’s intent, he said, LB34 created winners and losers by eliminating the refundable credit for the “vast majority” of Nebraskans who paid their 2023 school property taxes in 2024, resulting in a tax increase of more than $550 million.

“This is not just an accounting oversight — it is a direct financial burden to farmers, ranchers, homeowners and small business owners across the state,” Greisch said. “These Nebraskans budgeted for their property tax relief [they had] every reason to expect.”

Merlyn Nielsen testified in support of LB81 on behalf of a group that represents several agricultural organizations. He said last year’s measure cost his family more than $11,000 in relief they had expected to receive.

“For those citizens like me who have taken the property tax problem seriously and have worked with the Legislature and the governor to try and make relief a reality,” Nielsen said, “the loss of the 2023 tax credit is a very sour pill to swallow.”

Also in support was Suzan DeCamp of Omaha. She and her husband received a credit of approximately $1,200 last year and were expecting a similar amount this year, DeCamp said.

“It was a big hit on our budget,” she said.

Testifying in opposition to LB81 was Rebecca Firestone of OpenSky Policy Institute. She said Hardin’s measure is “not feasible” given the state’s projected $432 million revenue shortfall over the coming biennium.

With laws passed in recent years, Firestone said, the Legislature already has dedicated approximately $3 billion in state general funds to property tax relief over the same two-year period.

Terry Keebler, Johnson County assessor, testified in opposition to the bill on his own behalf. He said LB81 is a “solution to fix something that didn’t happen” and that, over a four-year period, almost all taxpayers received the same amount of relief they would have if LB34 had not been enacted.

“Those that paid [property taxes] in December got four years of income tax relief,” Keebler said. “Those that paid in arrears got four years of income tax relief — it was just different years.”

The committee took no immediate action on the bill.